Riches In Niches

Despite the fact that the US Census Bureau reported, at the end of 2013, that housing starts had increased 29 percent over the previous year, electrical contractors (ECs) generally agree that the residential market is not exactly taking off at rocketship pace.

Waiting for new starts to trickle down into substantial job opportunities is a forlorn long-term strategy that doesn’t make a lot of economic sense for ECs. Instead, they should be looking right now for niche opportunity customers—­specifically frugal middle-class homeowners who are retired or about-to-be-retired and have some stashed-away cookie-jar bucks to spend. With their mortgages paid off, they have cash readily available to put into improvements.

“Those who are able and willing to spend today are baby boomers who have some money put aside, are not planning to move, and want to upgrade their homes,” said Bruce Hartranft, senior product manager at Ideal Industries, Sycamore, Ill. “Electrical contractors say there is little or no action in new starts or whole-house work. It’s in targeted remodeling jobs suited to the individual homeowner’s discretionary spending budget.”

While these potential customers are not necessarily techies who are conversant with the latest electrical and electronic developments, they are benefit-driven and open to suggestions for how to enhance the quality of life within their homes and on their property.

These people are committed to staying in their homes for the foreseeable future and are amenable to improvements such as heated bathroom floors, instant hot-water dispensers in the kitchen, and new lighting and security systems.

One approach they respond to readily is the green philosophy, due to its ongoing widespread coverage in the media.

“The idea of green starts at home with many smaller, relatively inexpensive products or systems that give the owner the feeling of luxury and staying current,” said Frank Bisbee, president of Communication Planning Corp., Jacksonville, Fla. “Green rolls right into the concept of smart homes with controls for temperature, lighting, safety and security, or other energy-efficient systems. And the installation of these systems in the home is, of course, essential to its valuation when the time comes to sell.”

He noted that home automation equipment distributor Smarthome Inc. (www.smarthome.com), which offers a variety of affordable household control systems from major manufacturers is a useful resource for both ECs and homeowners.

‘Riches in niches’ and ‘man caves’

To make the sale easier, consider that baby-boomers typically live in homes that are 30–40 years old.

“The opportunities for electrical contractors are due, to a large extent, to the age of the homes, outdated equipment that needs to be repaired or replaced, stuff that just quit working,” said Kevin Canavan, president of Birch Electric, Gig Harbor, Wash. “We try to remind the owners of simple things like not overloading circuits. Many don’t understand what plugging in a new space heater can do to the existing load in the house. The consequences can be burning up outlets inside walls or even a main breaker trip that can’t be reset.”

Canavan also said that homeowners should be warned about being sold on going low-voltage when they are considering renovations.

“While we try to promote LED lighting where appropriate and applicable, as LED prices come down, the owner has to be careful of a contractor using LEDs in the load calculations to get pricing down just to win the job,” he said. “Because if the owner later decides to switch to another lighting technology, this could cause circuit problems. No one knows what technology developments and new appliances will become available in the near future, so it’s better for the homeowner to cover his bases now.”

He said that it is more important to give homeowners good long-term advice than it is to get the job at hand because they will remember the assistance provided when they have to place the next service call.

And there are some relatively new product offerings that homeowners are quite willing to invest in.

“An increasingly popular installation in colder climate areas is an electrical heating grid under sidewalks and driveways,” Hartranft said. “These customers are of an age when they no longer want to shovel snow or deal with ice underfoot, so it’s a nice, rich niche for an electrical contractor to get into. It’s something he should think about suggesting to the general contractors he works with because the grid obviously has to be installed before the concrete is poured. And a homeowner who’s going to put in a heated sidewalk is probably not shopping prices. This is a question of getting into a lucrative market on the ground floor, whether it be heated driveways, photovoltaic work, or remote sensing devices. There is much more profitability for the EC in niche markets than in commodity installations.”

One contractor Hartranft knows even developed his own niche. He remodels garages and turns them into state-of-the-art man caves.

“He puts in storage racks, closets and shelving; pulls wire for cable TV, telephone and Wi-Fi connections; and adds extra electrical outlets.” Hartranft said. “This way, the guy can watch a ballgame or talk on the phone while he’s puttering around in his newly renovated personal space. Here again, the EC might want to partner with a local closet-maker or garage refurbishing installer to offer a bundled state-of-the-art product for another customer who isn’t likely to shop price. Of course, installation of rechargers for electric cars is an area all to itself and represents significant opportunities for the electrical contractor.”

Working the ’hood

Knowing the service area intimately and using that knowledge to market one’s service capabilities and to identify potential business are essential in this continuing slack business cycle.

“Since the economy crashed in 2008, we’ve made an extra effort to get involved with chambers of commerce, other community networking groups, and the local utilities,” Canavan said. “A lot of the contractor companies that went out of business failed because they didn’t diversify into repairs and low-voltage upgrades and [didn’t] advertise these service capabilities.”

Many ECs have had extensive experience doing the initial electrical work on fairly large residential developments in their area, which gives them a natural foot in the door for getting follow-up renovation business.

“If a contractor wired a good part of a 160-home subdivision 15 or more years ago, he knows exactly what’s in those homes electrically, whether they have outside outlets, what kind of heating and air-conditioning there is, and he should have this in his database,” Hartranft said. “So, he should know what the amperage of the houses’ systems is and that, by now, they probably all need upgrading. So why not send out targeted emails or postcards saying that, when the house was built, it met all the NEC requirements, but the owner might want to bring things up to the current Code. And make some specific recommendations such as GFI outlets in bedrooms, upgrading the circuit box, increasing the amperage in the kitchen to allow simultaneous use of multiple appliances, or putting in outdoor outlets for holiday lighting.

“And be creative: Say, ‘It’s too late for Christmas lighting work this year, but here are some discount coupons to use if you call us in August when our business is slow.’”

Hartranft also urges ECs to consider offering customers a rebate if they convince two or three of their neighbors to have similar renovation work done. For example, if one owner wants to put in some outdoor spotlighting on plantings or the property perimeter, the contractor can explain that he’s going to have to rent a vibratory plow to pull the wiring, but if he can do two or three other yards, economies of scale kick in and the cost for all the owners will go down.

One neighbor bragging about a new installation is invaluable third-party testimony and plays effectively to the old keeping-up-with-the-Joneses mentality that is characteristic of so many American neighborhoods.

Another proven marketing strategy is to capitalize on specialty service capabilities and make sure that the customer base hears about these, whether by word of mouth or other means.

“We bought a fault-locater, which is an expensive piece of equipment, a radio-based device for finding underground faults,” Canavan said. “When power starts to fail in the house, the homeowner complains to the utility and is told to go find an electrical contractor who is equipped to handle this kind of work.

“Depending on your relationship with the utility, they may give the owner your name as an established expert. This also interacts with efforts being made by many utilities to have customers convert to underground lines to reduce outages.

“This kind of niche specialization is another way to gain a critical competitive service edge at a time when jobs are few and far between,” Canavan said.